A Shout-Out for Ostrom

Elinor Ostrom, the only woman to be awarded the Nobel Prize for Economics died on June 12 in Indiana. According to various press reports, Ostrom shocked her peers when she was catapulted to fame, because, in a field mostly dominated by men, she reached well beyond the usual mathematical modeling of economists.

Ostrom’s best-known research was on the management of the commons. As noted in Slate, “Standard economic thinking about commons focuses on the idea of a ‘tragedy of the commons’…” According to many economists, individuals acting in their own self-interest, would ultimately deplete a resource like a common pasture, which is open to everyone. This idea was used to demonstrate the need for government regulation or control by private industry. Ostrom disputed that view. Based on research and empirical evidence set forth in her book, Governing the Commons: The Evolution of Institutions for Collective Action, Ostrom demonstrated that local knowledge, cooperation and enlightened self-interest could be more effective than regulation from afar.

"A common framework consistent with game theory enabled us to undertake a variety of empirical studies including a meta-analysis of a large number of existing case studies on common-pool resource systems around the world. Carefully designed experimental studies in the lab have enabled us to test precise combinations of structural variables to find that isolated, anonymous individuals overharvest from common-pool resources. Simply allowing communication, or “cheap talk,” enables participants to reduce overharvesting and increase joint payoffs, contrary to game-theoretical predictions. Large studies of irrigation systems in Nepal and forests around the world challenge the presumption that governments always do a better job than users in organizing and protecting important resources."

She shared the 2009 Nobel Prize for economics with Oliver Williamson from the University of California, Berkeley. According to Rick Callahan, Associated Press, “Both were honored for analyzing the rules by which people exercise authority in companies and economic systems.”